Apparently, a misunderstanding has led to shrinkage of the appraisal business—and a clarification might allow it to flourish again. For the past several years, a common complaint has been that the appraisal industry is aging, and that the influx of new appraisers (such as it has been) can’t equal the number of retirees. The profession had become less attractive because of the number of hours of work an appraisal trainee had to put in to become fully qualified—and because Fannie Mae’s directive, issued in 2008, apparently required that a fully qualified appraiser always accompany a trainee on any property appraisal.
Recently, however, Fannie Mae suggested that the directive had been misinterpreted, and that trainees could, in many circumstances, conduct appraisal inspections on their own. In addition, in February of this year, the Appraiser Qualifications Board (AQB) approved changes to the appraiser qualifications.
The AQB reduced the number of hours of experience required for the Licensed Residential and Certified Residential credentials—and the time frame in which that experience must be acquired for all credential levels (including Certified General). It also provided additional options to satisfy the bachelor’s degree required for a Certified Residential appraiser, including allowing an associate’s degree or a certain number of focused credit hours, and removing all college education requirements for the Licensed Residential appraiser. These new minimum requirements have not yet been adopted by every state, but some states that have lowered their own requirements to line up with the AQB’s have already seen an uptick in the trainee appraiser population.
For related info, check out our article, “Is It Time to Take on an Appraisal Trainee?” featuring a Q&A with McKissock’s own Jo Traut.
Scott Murphy, owner of D.S. Murphy, an Atlanta-based appraisal firm, reports that since Georgia has revised its requirements to come close to those of the AQB, and now that Fannie Mae has clarified its position, his company has reversed its policy of keeping trainees to a minimum, and is growing both its trainee base and its overall business.
“I have been appraising for more than 30 years, and I own one of the largest residential appraisal firms in the South. We have been training appraisers since the day we started—and we have more trainees now than we ever have had. We’re training more than 25 of them right now, and we regularly hire new ones.
“Because the Fannie Mae rule of 2008 has effectively been lifted, trainees can now inspect properties by themselves. This allows the fully qualified appraiser to do more work and creates incentive for the trainer to work with new people. We’re seeing the numbers of trainees in Georgia increasing every month—and since we’re in a building phase, there’s enough work for everyone.”
Murphy explains that, in his observation, the appraisal industry “had been doing fine” up to 2008, with few barriers to entry. The edict from Fannie Mae, issued that year, which was interpreted as decreeing that the supervisor must inspect every property with the trainee, put an immediate halt to the hiring of trainees by most certified appraisers.
“If they had to inspect, along with the trainee, it just was not profitable,” Murphy says. “Admittedly, we pulled back and had just one or two trainees at a time, due to this constraint. However, early this year, Fannie Mae clarified their position and stated that the supervisor does not always have to inspect the subject property.
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“So now, it’s up to the lender to revise their policies to fall into line with Fannie Mae. It’s not easy to get a lender to move in a direction of less regulation and control, but many lenders have. More than 50 percent of the lenders we work with have fully adopted Fannie Mae’s newest position. They allow trainees to inspect properties on their own, once they meet minimum requirements.”
Murphy, who is chairman of the Georgia Real Estate Appraisers Board, says Georgia’s new requirements—which go along with the AQB’s educational minimum but still insist on more hands-on experience than the AQB demands—are acceptable to him.
“The AQB used to require two years and 2,500 hours of experience [for the Certified Residential classification],” he says. “The new requirement of one year and 1,500 hours is not enough to fully train an appraiser. In general, this is good for the profession, although it could possibly cause issues with state-to-state reciprocity.”
Mark A. Lewis, who chairs the Washington, D.C.-based Appraiser Qualifications Board, says it is not within the purview of the AQB to ensure appraisers are competent. Rather, it is the job of the AQB to set minimum requirements to ensure appraisers are qualified. Competency is something that comes over time. Additionally, all appraisers must comply with the Competency Rule found in the Uniform Standards of Professional Appraisal Practice (USPAP).
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Lewis doesn’t characterize the revisions to the Real Property Appraiser Qualification Criteria as a relaxing of the requirements, but rather an adjustment of the balance between the minimum education, examination, and experience requirements established by the AQB. Qualifying education required for all levels of licensure/certification remain unchanged, he notes. The major changes adopted by the AQB provide alternate pathways to obtaining a Certified Residential credential by not requiring a bachelor’s degree as well as the elimination of any college-degree education for the Licensed Residential credential.
“Additionally, the AQB adjusted the minimum experience requirement in light of the maturing of the license/certification exam as well the overall increase in quality of qualifying education,” he says. “With that in mind, the AQB tracks the number of first-time test takers for the licensed and certified credential levels. When looking at first-time test takers for the Certified Residential exam, the year-to-date 2018 figures show an increase of 56 percent from the same time period in 2017. While it’s still too early to say for certain whether or not the revised criteria have affected recruitment, the overall trend is positive.”
Since some states have requirements that exceed the AQB minimum, Lewis urges new applicants for licensure to check with their state regulatory agencies to determine what has been implemented. In general, he says, industry reaction to AQB adjustments has been positive.
“During the public exposure period for the revised 2018 criteria,” he says, “the AQB received a record number of written comments from the appraising community. We saw a mixture of comments, pro and con. We believe that we have struck a good balance between education, experience, and examination.
“The AQB is aware of the issue facing the appraisal profession, regarding the lack of willing mentors to train new appraisers. The reasons for this problem are many; however, the AQB is examining the thought that perhaps appraiser candidates could obtain a portion of their experience through a non-traditional training model. Many other professions use simulated or virtual training tools, and we’re studying this issue to see if this type of non-traditional training would work for our profession.”
Article written by Joseph Dobrian. Joseph Dobrian has been writing about commercial and residential real estate, and real estate-related finance, for more than 30 years. His by-line has appeared in The Wall Street Journal, The New York Times, The New Yorker, Real Estate Forum, Journal of Property Management, and many other publications. He is also a noted novelist, essayist, and translator. His website is www.josephdobrian.com, and he can be contacted at firstname.lastname@example.org.